McAllen mulls $652 million budget, lowering property tax rate

6 days ago 23

McALLEN — Officials here are mulling a modest decrease in the property tax rate that would still generate enough revenue to fund the city’s needs and produce a healthy surplus in its rainy day fund.

After months of work with dozens of department heads, McAllen City Manager Roel “Roy” Rodriguez — who is retiring Friday — is proposing that the McAllen City Commission approve a $652 million budget and a property tax rate decrease of nearly three-fourths of a cent.

“We’re happy to represent the budget for fiscal year 24-25. We’ve got a proposed decrease in the property tax rate — from a ($0.4572) to a ($0.4499 per $100 valuation),” Rodriguez said Monday afternoon during the last city commission meeting he would lead before retirement.

“And I’ll remind the public that this is the third year in a row that the city commission has approved a reduction in the tax rate,” Rodriguez added.

Highlights of the multimillion dollar budget include a 3.5% cost of living increase for both full- and part-time city of McAllen employees, and the creation of 25 new positions.

Of those, nine will be funded directly from the general fund, and another 16 new full-time employee positions will be funded through McAllen’s so-called enterprise funds — those departments that can independently generate their own revenue, such as the McAllen Metro, the Anzalduas Bridge and the sanitation department.

REVENUE HIGHLIGHTS

Moreover, McAllen’s financial position will be so robust in the coming year that the city will enjoy a rainy day cushion of nearly eight months’ worth of operational funds — well in excess of the 140 days of reserves called for by city policy.

McAllen will be able to sock away more than $94.4 million in its unassigned fund balance, which is enough revenue to fund some 232 days of operations, according to a 904-page draft copy of the city’s 2024-25 fiscal budget book.

Too, the city’s economy at large is so healthy that sales tax revenues provide a substantial offset to property taxes.

Sales tax revenues account for 43% of the general fund, while the property taxes people pay for their McAllen homes and businesses accounts for only about one-third, or 34%, of the general fund, according to the budget book.

But, as Rodriguez said, McAllen has the luxury of not being wholly dependent on those two revenue streams to fund the city’s operations.

“On the revenue side, one of the things that’s really important for us is that there’s more than just sales and property tax that compose the budget,” Rodriguez said.

“There’s 23% (of revenues that come) from what we call ‘other.’ And that’s charges for services, franchise fees, license and permits, investment earnings — which is not insignificant,” he added.

Additional revenues pour in from the city’s two international ports of entry, which transfer $6.5 million to the city’s general fund, while the McAllen International Airport generates another $2.2 million.

Still more revenue comes from “fines and forfeits (sic), (and) a one-time slug of a sale of property,” Rodriguez said.

WHERE THE MONEY GOES

As for what the city spends all that money on — as with most local governments, the largest percentage of appropriations go toward public safety.

In McAllen’s case, the city will spend about $78.7 million on public safety in FY 24-25, which begins on Oct. 1.

Of that, about $44.2 million will go to the McAllen Police Department, while another $26.6 million will go to the McAllen Fire Department, and $2.1 million will go toward paying for contracted EMS services.

However, no new officers will be added to the police department in the upcoming year, and only one position will be added to the fire department, according to the budget book.

The fire department had initially requested funding for 14 additional personnel.

McAllen will also make modest increases to its quality of life departments, such as parks and libraries.

The city is expected to appropriate more than $10.5 million for the parks department, and more than $5.8 million combined at the McAllen Library System’s three branches.

Meanwhile, the city’s investment in Quinta Mazatlan will increase by 10% in the coming year, the budget book shows.

The city plans to appropriate nearly $1.6 million for Quinta Mazatlan, which is nearly $109,000 more than last year’s budget.

In all, the city will invest $25.8 million on “culture and recreation,” $15.2 million on highway and streets, and $29 million in “general government,” Rodriguez said.

McAllen Mayor Javier Villalobos thanks Rodriguez and city staff for their hard work in preparing the budget, lauding them for being able to balance the city’s needs with a modest amount of property tax relief for residents.

PUBLIC FEEDBACK

And while the overarching theme of the budget season has been the city’s continued prosperity, at least one citizen watchdog offered a gentle admonition.

“We’re really happy with a lot of what is in there. There are a couple of issues that were of concern,” Mark Murray, a member of Futuro RGV, said during Monday’s public hearing on the proposed budget.

Futuro RGV is a nonpartisan citizen advocacy group that strives to improve communities “in the areas of economics, health, safety, environment, and education,” according to the group’s website.

Murray expressed concerns over McAllen lowering its property tax rate by three-fourths of one cent.

Though seemingly a very modest rate decrease, it nonetheless means McAllen will miss out on nearly half-a-million dollars in revenue.

“Lowering the tax rate left $466,000 on the table that could have been used to potentially meet some other departments’ requests,” Murray said.

Murray also wondered about the city’s decision to maintain such a large rainy day fund, saying that some of those monies, too, could have been reallocated elsewhere.

“One of the other issues was the 232 days of operating funds. … Having that is a good idea to have that excess available, but, perhaps lowering it to 202 days would have given you an additional $14 million that could have been used on other requests,” Murray said.

Rodriguez, the city manager, thanked Murray for his perspective, saying that city staff had actually considered his points while drafting the budget.

“I appreciate that last comment very much,” Rodriguez said.

He added that the commission will likely vote on additional funding allocations later in the fiscal year.

“Point well taken, and that’s actually something that we discussed,” Rodriguez said.

The city commission is expected to give its stamp of approval on the final budget at its next meeting.

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